The legalization of iGaming in the USA faces significant challenges, with progress in regulatory laws stalled at the government level. Despite the enthusiasm and hopes for change among gambling stakeholders and legislators each legislative session, little headway has been made since the US Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) nearly six years ago.
Currently, only seven US jurisdictions allow online casinos to operate legally, while 31 jurisdictions permit online sports betting, and 40 states have legalized some form of betting, but solely in physical locations. The 2024 legislative season has been particularly disappointing, with no state making significant strides towards legalizing online gambling, despite bills remaining on the table in several states such as Georgia, Minnesota, and Mississippi.
Several factors contribute to the difficulty in legalizing online casinos in the United States. Concerns about addiction, fears that online casinos may overshadow land-based establishments, and the belief that states do not yet require additional revenue are commonly cited reasons. However, there may be deeper underlying reasons for the lack of popularity in legalizing online casinos.
Publications such as the IGB analyze the complexities surrounding the legalization of online gambling in the United States, shedding light on the multifaceted challenges and considerations involved in this contentious issue.
Benefits for Small Companies in the Gambling Industry Upon Legalization of Gambling
Howard Glaser, global head of government affairs and legislative affairs for Light & Wonder, suggests that the issue of legalizing online gambling is less about legislation and more about market dynamics. Glaser points out that smaller, regional players in the industry may feel apprehensive about the potential benefits of legalization, especially when faced with dominant market leaders like DraftKings and FanDuel, which collectively hold an 80% market share in digital sports betting and casinos.
Craig Billings, CEO of Wynn Resorts, echoes this sentiment, emphasizing the importance for smaller operators to consider their individual market share in the context of online gambling expansion. He argues that while there is often a narrow focus on the overall market and taxes, smaller operators should prioritize their own competitiveness rather than relying solely on the broader industry trends.
Billings highlights the vast number of commercial and tribal casinos across the United States, questioning how many of them can truly leverage the benefits of an omnichannel strategy. He suggests that while large national gambling operators may have the resources to compete effectively in the online gambling space, smaller companies must carefully consider their role in the evolving landscape to avoid being sidelined.
Unity Can Save: Collaboration for Competitive Edge
According to Glaser, the key for smaller players in the gambling industry lies in banding together to form a competitive coalition. Currently, giants like DraftKings, FanDuel, and now Fanatics Betting & Gaming dominate the online casino and sports betting sector, leaving companies like Caesars Entertainment, MGM, and Penn Entertainment with a significant but less competitive market share. Other players, including Bally's, Bet365, SuperBook, Tipico, and various unbranded commercial and tribal casinos, also vie for a slice of the market.
While these smaller companies may not need a substantial market share to thrive, they must possess a vested interest in the game to succeed. Glaser points out that the lack of political support for online gambling legalization across the country stems from the reluctance of regional players to enter the fray. He emphasizes the need for these companies to find ways to participate, as their fragmentation hinders their ability to capitalize on potential opportunities if iGaming is legalized.
Glaser believes that unity among land-based casinos, whether tribal or commercial, will be crucial in advancing online casino legislation. By coming together to offer a unified product, platform, and revenue sharing model, these casinos can wield significant influence and address concerns about being marginalized in the market.
"In essence, the fear of regional and tribal players being squeezed out of the market can be mitigated through collaboration and unity," Glaser asserts. This approach could provide smaller players with the leverage needed to compete effectively in the evolving landscape of online gambling.
Unions Present Further Challenges
In addition to the hurdles highlighted by Billings, unions pose another significant obstacle on the path to legalizing online gambling. Billings noted that unions can wield considerable influence in shaping the landscape of online casinos within each state.
One of the key differences between successful iGaming platforms and traditional land-based casinos is the significantly lower number of employees required by online operations. As online gambling gains traction, there's a likelihood of downsizing in the workforce, which can prompt resistance from trade unions.
Addressing these underlying issues is crucial for the advancement of online gambling legalization efforts. While debates on the matter continue in state legislatures nationwide, it's essential to acknowledge and navigate the concerns raised by trade unions.
Brandt Eden, head of government relations at Fanatics Betting & Gaming, emphasizes the importance of accurately framing the discussion around online gambling. Eden highlights the need to clarify terms, as misconceptions can hinder progress. By emphasizing terms like "online casino" and focusing on aspects like consumer protection, the industry can effectively communicate its objectives to legislators and stakeholders alike.
Maryland and Maine: Potential Bright Spots for the Gambling Industry in 2024?
Amidst uncertainties surrounding the future of online gambling in 2024, attention turns to Maryland and Maine as potential beacons of hope for the industry. Eden, a former Michigan state representative, and Sean Fluharty, a West Virginia delegate, both seasoned advocates for iGaming legalization, remain cautious about the prospects for online casinos this year.
In Maryland, lawmakers are demonstrating notable efforts in support of online gambling. A House subcommittee recently amended and passed the online gambling bill, known as HB 1319. This latest version of the bill authorizes 25 online gambling licenses, prohibits credit card funding, and emphasizes diversity, equity, and inclusion in the licensing process. The upcoming meeting at Morgan State on March 15 signals a significant step forward, offering a public educational session on online casinos—an unprecedented move in the United States.
Meanwhile, Maine emerges as another state actively engaged in discussions on legalizing online casinos. Following a comprehensive gaming bill signed into law by Gov. Janet Mills in May 2022, the state's four tribes gained the ability to operate online casinos. The current legislative proposal grants tribesexclusivity over digital gambling, similar to the arrangement for sports betting. However, brick-and-mortar casinos operated by Churchill Downs and Penn Entertainment would be barred from offering digital gambling. While a key bill awaits consideration by the state's Joint House of Veterans Affairs and Legal Affairs, a hearing date has yet to be scheduled.
As debates continue and proposals evolve, Maryland and Maine stand as potential trailblazers in paving the way for online gambling expansion in the United States in 2024.
Online Casinos: A Boon for Tax Authorities?
As of the beginning of 2024, there was optimism surrounding the potential legalization of gambling in several states, including Illinois, Indiana, Maryland, New Hampshire, and New York. However, hopes were dashed within two months of the legislative season. Despite Bally's recent launch of its online casino platform in Rhode Island—more than four years after introducing online sports betting—there is little cause for celebration.
On the surface, legalizing online gambling appears to be a lucrative option for states, particularly in terms of tax revenue. Data from US Bets and Sports Handle reveal staggering differences in tax revenue between online casinos and sports betting. For instance, in Connecticut, tax revenue from digital casinos in 2023 totaled $60.2 million, compared to $19.5 million from online sports betting. Similarly, Pennsylvania saw casino tax revenue of $490.4 million in 2023, far surpassing the $155.9 million from sports betting. In West Virginia, where both sports betting and online casinos were legalized in 2018, digital casino tax revenue was five times higher than that from sports betting.
The fact that 2024 is an election year may influence decision-making in some cases. While legalizing online gambling, or sports betting, may not be a top priority for voters compared to other issues, politicians are likely to respond if there is significant demand from constituents, whether individuals or corporations.
As Fluharty emphasized in New York last week, passing legislation on sports betting was challenging, but lawmakers ultimately respond to the desires of their constituents to secure reelection. However, if the majority of constituents are not in favor of legalizing gambling or are unsure about it, progress on the issue is unlikely.
